A very interesting article by Phillip Molner at the Union-Tribune yesterday described why so many people have stopped buying vacation rental homes in San Diego. (It’s only for subscribers, so there’s no link.)
Here’s Molner’s main points:
Overall, interest rates and home prices are so high in San Diego that even vacation rental buyers have fled.
- Mortgages for second homes in San Diego metro down 45 percent in 2023, said a new study from real estate website Redfin and data analytics firm Optimal Blue. These typically are a good indicator of vacation rental purchases.
- Vacation rental purchases, for platforms like Airbnb and Vrbo, were down nationally by 40 percent;
- There were 411 second-home mortgages in San Diego metro in 2023, down from 753 the previous year.
- Second-home purchases have greatly decreased since interest rates started rising.
- There were 1,303 second-home mortgages in 2018, 1,143 in 2019, 1,241 in 2020 and 1,441 in 2021.
- Second-home purchases made up 2.1 percent of all mortgages in San Diego County in 2023 — down from 4 percent in 2018.
- Of the nation’s 50 biggest metros, San Diego had the 26th biggest drop — middle of the pack compared to other big slumps. Austin, Texas, which had the largest decline, saw second home mortgages fall 62.5 percent.
- Rental analytics company AllTheRooms: in April in San Diego County 6,153 vacation rentals were available (89 percent entire home, 11 percent private room) with an average daily rate of $389 at the end of April, down from $412 at the start of the month.
- It said the occupancy rate was 75 percent.
Here’s an interesting quote from Molner:
There’s at least some evidence new rules are having the opposite effect, perhaps leading to a change in the future.
Anderson said many accessory dwelling units that used to be used for vacation rentals were switched to 12-month leases following longer stay requirements.
The problem is that many vacation renters would take Ubers to the ADU, she said, but now full-time renters have their car parked on the street all year — making traffic much worse than when it was a bunch of Airbnbs.
Remember, always go to the source material; here’s the Redfin study.
This analysis relies heavily on mortgage data. A high proportion of housing purchaces have been cash offers which would not requre mortgages.
Good point, Lyle.
This imploding catastrophic volatility of our egregiously overvalued and legislatively manipulated housing market has been brought to us by the Politico-Corporate Real Estate Complex. And the letter G – FOR GREED
A short while back Frank provided OB Rag readers a breakdown of the cost of a mini soviet block style ADU slated for AirBNB’s in Ocean Beach, including the projected property taxes. When broken a little down further, the conclusion could be drawn was that these one BR units @ 100% occupancy would have to generate approximately $450/night, 365 days a year, in order to cover their cost.
Point being, that Wall Street, VRBO, AirBNB, nor Expedia STVR’s are not, and have not been “mortgaging” and neither are speculators.
I’ve read that up to 70% of homes sold, never actually get listed before they have been actually sold and in most cases for cash. If this is valid, at any percentage would not a “cash” transaction of just one single family home ripe for money laundering, and internationally none-the-less?
When was the last time we read about an organized crime ring busted up? What’s the name of the cartels? Where are those investigations by the FBI, FTC, DHS, and Interpol, bupkis?
What this data above does conclude is that Vacation Rental Investment is NOT at all representative of the overly projected “Mom and Pop Landlords” just trying to “make it in San Diego” with “passive income” narrative.
It is also indicative of the extraction of almost all the real estate wealth from our city, our county and our State’s economy. Corporate Raiders, tax immune Corporate behemoths monopolizing mankind’s most basic essential physiological need, shelter and ending prosperity and the American Dream. With no endgame, just crash.
The Corporate Real Estate and the Speculator’s exposure in the San Diego housing market alone is staggering, but then consider that the rest of the state it is one massive powder keg, it’s eye-popping.
Commercial Real Estate Example:
San Francisco – New York Life Real Estate Investors and Bridgeton have acquired an office building at 410 Townsend St. for $22 million, a discount of nearly 75% compared to the last time the property traded in 2019.
Blackstone completed its $6 Billion Tricon Residential acquisition, and has the third-largest U.S. single-family portfolio (61,964 U.S. single-family homes), behind Progress Residential (83,502 single-family homes) and Invitation Homes (81,716 single-family homes).
San Diegans found out recently we now have a positive 26 year inventory of overvalued, and tax subsidized “rentals” countywide.
Yet with a 26 year surplus rents continue to rise. And on the 5th of every month the growing number of homelessness San Diegans swells exponentially.
The market giveth and the market taketh away.
The above commenter points out a very important point. I assume the percentage of secondary/investment housing units bought without mortgages is much higher than average. This does make the analysis extremely flawed as it could just be investors have shifted away from mortgages to other ways to purchase units such as cash.
Another issue with STRs is the concentration within subareas of jurisdictions. So while City of San Diego or the region as a whole may be seeing declines in these types of purchases this may or may not remain true for smaller subareas, such as Ocean Beach.
For an anecdotal example, this home on Guizot were sold recently and immediately converted to a STR.
https://www.zillow.com/homedetails/2147-Guizot-St-San-Diego-CA-92107/99526841_zpid/
FYI,
To read the article without a subscription, simply copy this:
https://www.sandiegouniontribune.com/business/story/2024-05-15/sut-l-second-mortgages-0515
and paste it into this:
https://archive.ph/
Thanks for that info, Chris.
You’re welcome.
The article specifically points this out: The Redfin study isn’t a perfect indicator of vacation rental purchases. Some well-heeled owners might be buying homes with cash or there are some reasons why someone might get a second mortgage besides an Airbnb piggy bank. However, a second mortgage is the most typical way a vacation home is purchased and a fairly good indicator.
One report had 30% as cash buyers. Some likely buying cash and then pulling the equity out later at better terms.
What sort of garbage is this? ADUs have never been allowed as short term rental use, even before the current ordinance came into effect.
(Aside from a small number of “companion units” built before 2018)
All this really shows is the vacation rental industry and home purchases are consolidating into investor corporations that are buying them outright without needing a mortgage. Most of the vacation rentals in the city are now owned by commercial operators, not mom and pops.
Homeownership in SD is slipping, not going up. https://www.sandiegouniontribune.com/business/story/2023-05-28/homeownership-in-san-diego-loses-ground-in-last-decade-especially-for-minorities-and-younger-middle-aged-households#:~:text=Newly%20released%20data%20from%20the,to%20transform%20renters%20into%20owners.
Homeownership in pretty much all major cities in the U.S. is in decline and it may be time for most people to re-think homeownership as something they will have in their lifetimes.
Time to start re-thinking? “Sucks to be you man”, much? When they came for me, or in this case my neighborhood, there was no one left to speak up for me…
Mateo,
I’m a renter and at this point in my life I will never be a homeowner so it’s not a matter of “sucks to be you”. As things are going, I mY have to leave the state in the not too distant future. Don’t be so quick to make assumptions.
Yes.
This latest article from Thom Hartmann… is exactly why this vacuuming up of real estate (and everything else) by the extremely wealthy is not going to stop. Why should they? They’re just getting richer! And they own the lawmakers.
The obscenely rich are destroying what we thought were the foundations of this country, and have turned it into an de-facto Oligarchy. Just like last time, they just don’t care but then sociopaths/psychopaths can’t be expected to.
The Last Time Oligarchs Tried to Take Over America It Led to Civil War
Is America in the final stage of the 40-year transition from a forward-looking & still-evolving democratic republic into a white supremacist ethnostate ruled by a small group of fascist oligarchs?
https://hartmannreport.com/p/the-last-time-oligarchs-tried-to-f57
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I’d have to add one more political description. Theocracy by the Christo-Fascist component which definitely makes it far worse because those that benefit paint everyone that disagrees as being against ‘god,’ so anything done to those ‘Others’ to force compliance is completely justified.
Great power, backed up by enormous wealth, under the umbrella of can-never-do-wrong religious beliefs, led by an autocratic political party?
All thanks to Ronald Wilson Reagan who really started this ball rolling hard nearly 50 years after the previous attempt in 1934 to overthrow the US and install a Fascist dictatorship aligned with Nazis but the US version would be ruled by the wealthy of Wall Street. Those that own the corporations now have some mighty big vacuums this time, more powerful than ever, can’t you hear that very loud sucking sound?
And Chris, I think the goal here is for there to be NO home ownership, just an endless supply of sharecropping hamsters running on the rental wheel of never-ending rent increases for the profit of the few.
Ain’t Capitalism grand? s/
sealintheSelkirks
Then why do you acquiesce? How is this ok?
This is a manipulated housing market. It is intolerable and has been insufferable for years, and sadly you are getting swept up in the collateral damage of the same sycophantic corporate housing policies imposed on us by the California Democratic Party, and specifically the Central Democratic Committee Agenda. Force fed the candidates that only pledge their fealty to “the Party”. This is what our Democratic Party has become now, the party of corporate real estate oligarchs.
Chris, there is still time to fight while you still live here right?
I continue to try and lead by example, this is not just my fight it is for all the subsequent generations that come after me.
Get involved make a difference. Email, call, protest, attend a council meeting a planning group join the activist groups out there. Do not go quietly into the night.
Otherwise, maybe you should be happy you have another state to go to. 73% of the newly made homeless in San Diego are San Diegans. The largest majority are renters over the age of 60, living on fixed incomes in existing affordable housing (sans “quotation marks”) Maybe these neighbors do not have the mobility, nor the means to defend themselves.
Perhaps it could be your voice, when raised and amplified, that can help them and in turn perhaps help yourself.
Home ownership set sale for this Gen X kid a long time ago Chris, but I have fought on for years, over decades.
Defeatist posturing, and self pity do nothing but discourage others from taking action.
Mateo, you’re either reading way too far into my statement or misinterpreting.
Just because I said homeownership is not in the cards for many and that me leaving the state is a possibility in the future doesn’t mean I don’t think people shouldn’t fight against what’s happening. I’m sure we’re definitely on the same page about short term rentals infiltrating residential neighborhoods. But the fact is, homeownership is just not in the cards for many people, me being one of them.
As a separate issue, it shouldn’t have to be the end all be all IMO. I’m more about fighting against the insane rent increases that are forcing people to upend their lives, whether it means moving farther away or even leaving the state altogether or in worst case scenarios, homelessness. Once upon a time, choosing to remain a renter had its own advantages.
Homeownership should be a priority for everyone, including policy makers. It’s the only sustainable form of housing security. How many will be able to afford future market rents when they are collecting social security?
kh, a bit harsh, mi amigo; 70% of the residents of OB — those you represent — are renters. I lived in OB for decades wo/ owning a home. Although, I directly know the impulse to buy. My daughter and her fam moved out of Calif to buy a house in Oregon (but now they’re sick of the weather there).
People can live out their entire life without owning a home; it really is not the end-all be-all. You can be a renter, be involved in your community and be happy (unless you think of trump and the threats to our democracy).
It’s closer to 85%. Meaning most of my neighbors are at the mercy of a property owner, mostly out of town trusts/heirs, and are potentially one fickle decision away from being priced out or displaced. Which is why we have such high turnover. There are many long time renters in the community that can only afford it because of the grace of a landlord who isn’t charging them market rent. I don’t fault anyone for being a renter, it’s about impossible to afford anything here without being a doctor or lawyer. But oroperty ownership is still a good thing for residents and for the community at large. We should favor projects such as condo conversions and small lot subdivisions and create more ownership. Most of the city’s housing programs only succeed in creating more market rate rental units.
It’s really at 85%? It’s been in the 70s percentiles for decades. If that’s true there has been a significant increase in renters in OB over homeowners.
And you’re right about everything else.
The real estate industry’s inherent, built-in free market regulator has always been home ownership.
The elimination of Glass-Steagall firewall between investment and commercial banking in 98.
The Troubled Asset Relief Program, TARP, legislatively facilitated Wall Street’s strong-arm takeover of housing.
In 2008 there were not even a handful of Real Estate Investment Trusts, publicly traded corporations acquiring single family homes.
After TARP REIT’s grew exponentially. Now there are 192 publicly traded companies on the NYSE and 24 more REIT’s on the NASDAQ by the end of 2023.
Wall Street remains legislatively green-lit to continue to wreak unmitigated havoc on this massive scale that it has and continues to do.
Chris our situation only gets worse by the minute. Build-baby-build has produced nothing but increasing rents, and career politicians.
The California auditor found that $24 Billion allocated to solving homelessness is largely unaccounted for, and city and county governments are to be held accountable.
This is not representation, and this is not solution based leadership.
Create a CITYWIDE coalition, make a simple website, speak at the non agenda comment items, write, fight, show up for the Uptown Group, join forces with Hillcrest Planning Group that is now under attack.
What this corrupted Oligarchy has done to the American Dream is unacceptable, myopic short-sided and idiotic.
The long term damage to the economy inflicted by this mindless greed is matched only by the stupidity of the fact that money circulates from the bottom up through the middle classes.
No more debt/home equity spending from home/condo ownership? That’ll affect the economy rest assured.
Rents are taking 40%,50%,60% of incomes?
BYE-BYE DISPOSABLE INCOME. Credit cards are maxed because of monopolized industry inflation.
This City continues to suffer massive shortages of nurses, police officers, teachers, lab techs, surgical techs, paramedics, firefighters. These careers cannot pay the ever increasing rents. Everyone can visually confirm that our infrastructure is crumbling all around us.
But keep swinging. The people are the only ones that can stop this.
(and a potential total global market collapse)
So with that, saying I’m being “defeatist” is a bit unfair.
It was harsh; but something very important worth noting. Using phrases or words that only act to reserve yourself to defeat is defeatist. Try, unless I take action and help others to see, then I will never own a home, and if you can’t, most certainly the generations that follow you will never have a snowballs chance in Hell, if I don’t take a stand.
Situation resonates with me.
A month or so ago, my family decided to sell a 2/2.5 condo in an amazing solana beach complex right along the coastline for $1.2. It is the lowest priced unit in the complex. They’ve owned this unit since the 80s, it has been a long term rental for most of its life, has unfortunately never been upgraded, so it has that 1980s lack of charm. The unit definitely needs to be gutted and everything updated.
We had three offers the first week, entered escrow with one, then they fell out (and frankly seemed sketchy the whole time), and now we have had nothing but lookeyloos. We all thought that a cash investor would snap it quickly by a vacation rental investor but it is sitting.
The complex is great with pools, jacuzzi’s, tennis, beautiful courtyards and common areas and a semi private beach but it also has a very large property assessment hanging over it over because the HOA mismanaged the property for years and now the exteriors on the entire ~300 unit complex need to be redone. Because of this assessment and the renos needing to be done to the unit, no bank is gonna want to finance the unit so we need a cash buyer/investor.
I’m not sharing this info to sell the unit, I’m just confirming that it seems like all cash buyer/investors have back off the market and they are not snapping up everything that hits the market. Maybe if I could have convinced the family to sell a year ago or even two years ago, we would not have had this issue. But now, I’m having some serious real estate crash PTSD (I was unfortunately caught in the last crash and it was soul sucking awful). Unless a property is in pristine condition and ready to rent tomorrow, I’m gonna say that listing anything now, is not a sure thing.
It isn’t just the San Diego…or the US as a whole having a housing crisis. But other politicians are looking at much better ways of alleviating the strain:
Spain Orders Airbnb to Take Down 66,000 Rental Listings
The government is widening a crackdown on tourist rentals as it seeks to alleviate a painful housing crunch.
https://www.nytimes.com/2025/05/19/business/airbnb-listings-spain.html?utm
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Imagine San Diego’s crappy ‘leaders’ doing something like this? All those STVRs turn into actual housing for people/families, and then these absolutely awful mass density ADUs and mass apartment buildings WOULD NOT be needed! Hell, tear ’em down and build parks instead.
sealintheSelkirks